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Paycheck Protection Program and WARN Act Relationship

2020-04-28

Employers using PPP funds that re-lay off or re-furlough 50 employees at a single site still need to provide WARN notices

The Paycheck Protection Program (PPP) provides forgivable loans to businesses with 500 or fewer employees that have been negatively impacted by the COVID-19 pandemic.  The loans can be used during an eight-week period for the business to use for payroll costs, rent, utilities, and mortgage interest but at least 75% of the money must be used for payroll costs.

The Worker Adjustment and Retraining Notification (WARN) Act covers employers with 100 or more full-time employees, not counting employees who have worked less than six months in the last 12 months and not counting employees who work an average of less than 20 hours a week.   WARN compliance notices must be given to employees at least 60 calendar days in advance of a plant closing or layoff affecting 50 or more employees at a single site of employment.  WARN is not trigger if the layoff is for six months or less or if work hours are not reduced 50% in each month of any six-month period.

Layoffs or furloughs at the end of the PPP loan may qualify under federal WARN if covered employers re-lay off or re-furlough 50 employees at a single location.  Some states have mini-WARNS acts which lower the threshold for employer size and layout amounts.  For example, in New York an employer with 50 countable employees can trigger WARN with 25 employment losses at a single site. 

If an employer laid off or furloughed employees in March or April in response to the pandemic without giving the 60 days’ advance notice, either anticipating that they would recall employees within six months or relying on the unforeseeable business circumstances (UBC) exception in the federal and many state mini-WARN Acts may have to give WARN notices to employees at the time of re-hire or before.  The UBC exception allows employers to provide WARN notice with less than 60 days’ notice for plant closings and mass layoffs caused by business circumstance that were not reasonably foreseeable at the time full notice would have been due.  Even though it does not excuse the full notice it allows employers to give notice as soon as is practicable.

If employers fail to provide WARN notices in advance of the post-PPP layoff, they could be liable for substantial sums.  Employers may want to rely on the UBC exception; however, notice is required as soon as practicable before the layoff, at or before the time to recall. 

Many states have recognized the issues that arise when employers accept PPP funding and try to comply with federal and/or state WARN Acts.  California has relieved the 60-day notice requirements mandated by the CA’s Worker Adjustment and Retraining Notification (WARN) Act.   New Jersey has indicated that layoffs associated with COVID-19 do not trigger the state’s mini WARN Act.

Federal WARN Act website

The foregoing has been prepared for the general information of clients and friends of Workplace Dynamics LLC and is not being represented as being all-inclusive or complete. It has been abridged from legislation, administrative ruling, agency directives, and other information provided by the government. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel.